Donald Trump and the US Financial Sector: Will America Be Great Again?

by Guest on May 30, 2017

“We will make America strong again. We will make America proud again. We will make America safe again. And we will make America great again.” – Donald Trump

Donald Trump’s campaign to be the 45th president of the United States of America was built on the core premise that he would do what it takes to “make America great again.”

To convince voters that he would indeed make America great once more, Trump made a series of promises during his long presidential campaign. Some of the more notable commitments include banning all Muslims from entering the USA, building a wall along the Mexico border, and dismantling the Dodd-Frank Act that was signed into law in 2010 following the 2008 – 2009 global financial crisis that originated from the inadequate regulation of the US financial sector.

Additionally, it is worth noting that the Trump camp did not initiate this campaign slogan. It originated with Ronald Reagan during his 1980 presidential campaign. However, Trump had an attorney register the slogan, and he requested exclusive rights to use the slogan for political purposes on 12 November 2012. It was finally registered as a service mark on 14 July 2015. The most pertinent point here is that Trump later denied that he knew about the Reagan connection to the original slogan. The reason why this fact is important is that Trump’s ever-changing rhetoric seems to be a symbol of both his campaign and, consequently his role as one of the most powerful men in the world.

The Dodd-Frank Act

What is the Dodd-Frank Act, and is undoing it an important part of improving the financial and economic conditions within the USA?

In summary, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into federal law as a response to the 2008 financial crisis by the then US President Barack Obama in 2010. In essence, it is a massive work of financial reform legislation which is intended to “decrease various risks in the U.S. financial system.” The Act allows for the establishment of a number of new government agencies to oversee the implementation of the different components of the bill and by extension the American banking system.

As part of his campaign promises, President Donald Trump pledged to repeal the Dodd-Frank Act; however, once in power, he signed an executive order on 3 February 2017 to start a review of the Dodd-Frank Act and its role in the regulation of the financial sector. He did not revoke any parts of the act.

Furthermore, this executive order contains what the Trump administration has termed “Core Principles” to govern and regulate the financial industry. Finally, the order states that the Treasury Secretary must consult with the members of the Financial Stability Oversight Council to determine whether the statutes contained within the Dodd-Frank Act support his core principles.

Financial Reform: The impact on the financial industry and the economy

By way of answering the question of whether repealing the overly punitive parts of the Dodd-Frank Act will substantially improve the financial and economic conditions in the USA, the Act’s supporters accept that parts of the law can be adjusted to simplify it as well as remove the elements which contain excessive financial regulations. However, a continuing theme throughout any discussions about the Dodd-Frank Act is the worry that by changing the stringent parts of the act, the advantage of the law will be negated.

A financial guru from Sterns Options is of the opinion that “while there is no doubt that the revoking of the punitive financial and banking regulations means that the banks will be able to grow their business and increase their transactional profits, the financial industry still needs to tread with caution to ensure that a repeat of the 2008 financial crisis does not occur.”

Additionally, Michael Barr, University of Michigan Law School professor and a principal architect of the Dodd-Frank Act is of the opinion that revoking the Dodd-Frank Act would jeopardize the interests of the American middle class, investors, and retirees. He believes that Dodd-Frank put in place practical guardrails to prevent the 2008 financial crisis from reoccurring.

Final Thoughts
Will the repealing or modification of the Dodd-Frank Act allow the American financial industry, and by extension the USA economy to grow again? In the short term, yes, I believe it will; however, what impact will it have on the global financial markets if the USA descends into another financial crisis because there is very little regulation of the financial industry?

Will the repealing or modification of the Dodd-Frank Act allow the American financial industry, and by extension the USA economy to grow again? In the short term, yes, I believe it will; however, what impact will it have on the global financial markets if the USA descends into another financial crisis because there is very little regulation of the financial industry?

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